Crypto Moguls Prepare for Capitol Hill
Representative Maxine Waters, the chairwoman of the House Financial Services Committee, called Wednesday’s hearing on cryptocurrency.Credit…Sarahbeth Maney/The New York Times
Congress gets a crash course on crypto
Today, the chiefs of six cryptocurrency companies will testify before the House Financial Services Committee about the promises and perils of crypto assets. It’s the first time crypto executives have been summoned by lawmakers in this way, a sign of the industry’s maturity — and the risks that regulators see in its rise.
The hearing is a potential step toward legislation, and was called by Representative Maxine Waters of California, the committee’s Democratic chairwoman. It’s part of a “fact-finding mission” that will help members determine what steps to take on crypto issues, a committee aide said. He declined to provide a timeline for potential legislative action, but acknowledged it could come soon. (The hearing begins at 10 a.m. Eastern and will be livestreamed.)
Stablecoins are likely to be a major point of discussion. These fast-growing crypto assets, which are ostensibly pegged to the value of stable assets such as the dollar, are key to transactions in volatile crypto markets. But the backing of some stablecoins isn’t as stable as issuers have claimed, raising concerns about a digital bank run that could threaten the wider economy. Financial regulators last month asked Congress to “act promptly” to address these risks.
Crypto executives will tell lawmakers to think big. Brian Brooks, who was acting comptroller of the currency during the Trump administration and now heads the blockchain tech company Bitfury, said that American policymakers were too preoccupied with small issues, like whether stablecoin issuers should be granted banking charters. They were insufficiently concerned with global primacy and offering investors safe access to the products they want, he said.
There is more to come soon. The Senate Banking Committee just scheduled a hearing on stablecoins for next week. (The witness list has not been finalized.) Senator Sherrod Brown of Ohio, the committee’s Democratic chairman and a vocal crypto critic, told DealBook he was reviewing responses to a letter he recently sent to major stablecoin issuers and investors that asked about their operations and relationships. Like the House hearing, the Senate event will be a “step” toward legislation, he said, adding that he was “working together” with the S.E.C. and Treasury Department.
The senator does not expect the crypto executives to say much that he has not heard before. Recalling the “financial wizards” who promoted mortgage-backed securities ahead of the 2008 financial crisis, he asked, “When are we going to learn?” Brown added, “I want responsible innovation, and that means rules.”
HERE’S WHAT’S HAPPENING
Pfizer says a third dose of its coronavirus vaccine is needed for “significant protection” against the Omicron variant. Initial evidence showed that two doses alone “may not be sufficient” to guard against infection but may ward off severe illness, Pfizer and BioNTech announced this morning. In other coronavirus news, Britain is reportedly preparing to impose new pandemic restrictions, and scientists have discovered a variant of the Omicron variant that is harder to distinguish with standard tests.
Angela Merkel steps down after 16 years. Amid pomp and paperwork, Olaf Scholz formally succeeded Merkel as Germany’s chancellor and perhaps the most influential leader in Europe. He faces several crises, including the pandemic, the risk of conflict with Russia over Ukraine and an effort to revive progressive politics in the E.U.
President Biden’s nominee to lead a top banking regulator bows out. Saule Omarova faced opposition from Republicans and bank lobbyists, who balked at her academic work proposing sweeping changes to the banking system. But skepticism from moderate Democrats ultimately doomed her nomination.
The House narrowly advances legislation to help avoid a U.S. default. Lawmakers voted 222-212 to approve a bill that makes it easier for the Senate to raise the debt ceiling soon, though both chambers must still approve separate legislation to do so. They also voted to avert billions of dollars’ worth of cuts to Medicare.
Amazon’s cloud outage hits a wide range of businesses. An hourslong disruption to Amazon Web Services interrupted a variety of services, from Disney+ to Roomba vacuums to Ticketmaster. It also threw a wrench into Amazon’s warehouse and logistics operations, near peak holiday shopping season.
Big companies fight A.I. bias in hiring
Some of the biggest names in corporate America are joining an effort to prevent artificial intelligence software, which H.R. departments increasingly use to screen résumés and assess job seekers’ skills, from delivering biased results. The Data & Trust Alliance, announced today, is backed by Facebook’s owner Meta, Nike and Walmart, among others, and will be led by the former American Express C.E.O. Ken Chenault and Sam Palmisano, the former head of IBM.
The group has designed a test to measure whether systems are promoting bias, particularly in the hiring process. Seemingly neutral data sets, when combined with others, can produce results that discriminate by race, gender or age. The group’s questionnaire, for example, asks about the use of “proxy” data including cellphone type, sports affiliations and social club memberships. The evaluation program has been developed and refined over the past year.
“This is not just adopting principles, but actually implementing something concrete,” Chenault said. The former Amex chief, who was previously on Facebook’s board, also rebuked a popular Silicon Valley ethos of debuting tech and only then addressing the consequences: “We’ve got to move past the era of ‘move fast and break things and figure it out later,’” he told The Times, alluding to a previous motto of Facebook.
But can the companies themselves be trusted on this? Ashley Casovan of Responsible AI, a nonprofit group developing a certification for A.I. products, said the focused approach and corporate commitments were encouraging. “But having the companies do it on their own is problematic,” she said. “We think this ultimately needs to be done by an independent authority.”
“I still see the word ‘senior’ and ‘elderly’ too often. The idea is to market not to a name and not to an age, but to the stage of life or vibrancy.”
— Susan Golden, a lecturer at the Stanford Graduate School of Business, on products explicitly aimed at aging customers, a fast-growing demographic. Many marketers have instead shifted their messages to focus on the needs met by these products.
Banking for migrants
Majority, a banking app aimed at U.S. immigrants, announced yesterday that it had raised $27 million in a funding round. The app, which launched in early 2020, will also begin allowing customers to open an account without providing a Social Security number or other U.S. government-issued identification. DealBook spoke with Majority’s C.E.O., Magnus Larsson, who is Swedish and is in the process of moving to Miami from Stockholm, about the idea behind the business. The interview has been edited and condensed.
How has your own experience trying to immigrate to the U.S. influenced the app?
One thing we produced, because of my experience and because Covid made things harder, was a migrant handbook. The culture barrier and the needs that you have when you are moving to another country are quite large. We want to be a cultural reference. Whether you come from Cuba or Nigeria, the person you meet when you start to work with our company will be someone from the same community.
How do you “meet” your customers?
We have people from the community selling and marketing our app. Usually it is someone you meet outside a grocery store, could be a friend or relative, but likely someone from the community. They are outside contractors, but are people who want to be in marketing and sales, not customers recruiting others. We want this to be a career path into the financial services industry.
How are you able to open bank accounts without a form of official U.S. identification?
We have spent a lot of time working on the sources to verify that the person is the person they say. Our ambition is to be better than any other bank at knowing our customers and where they live.
You charge $5 a month, but say you save your customers as much as $21 a month. What are you talking about?
If you look at what the population we serve pays in fees for the services they can get with our monthly membership, that’s what we are basing those numbers on. Typically there are tons of fees, for overdraft and ATMs.
Bank fees have generally been going up in recent years. Do you think that will change?
All the new entrants, like Majority, are coming to the market and the banks see that. The fees need to go down, especially fees such as overdraft that are unfair.
THE SPEED READ
Nestlé plans to sell 20 percent of its stake in L’Oréal, worth about $10 billion, back to the beauty products maker. (Reuters)
The embattled Chinese real estate developer Kaisa halted trading in its shares after it failed to meet a debt repayment deadline. (FT)
Stellantis, the automaker that combines Fiat Chrysler and the Peugeot group, plans to spend $34 billion over the next three years to develop software and vehicles to catch up with the likes of Tesla. (NYT)
Many of this year’s hottest I.P.O.s turned out to be duds. (Information)
And once-ebullient Silicon Valley investors are worried that start-up valuations will fall next year. (Bloomberg)
New York City businesses are scrambling to figure out how to comply with the city’s new vaccine mandate. (NYT)
Regulators are examining whether Robinhood and other apps aimed at millennials make it too easy to trade risky stock options. (WSJ)
Coal miners are emerging as a major hurdle to President Biden’s climate goals. (NYT)
“As It Turns Out, Jay Powell Is Popular and Millennials Really Like Him” (Bloomberg)
Best of the rest
American workers are set for their biggest pay raise in over a decade. (Insider)
Amazon has become the standard-setter for wages and benefits for many low-skilled jobs. (WSJ)
In organized labor news: Starbucks’ effort to halt a union vote count was rejected; striking Kellogg workers at four cereal plants rejected a proposed contract negotiated by their union.
Elizabeth Holmes concluded her six days of testimony in her securities fraud trial with flat denials that she misled consumers and investors. (NYT)
Bad news, latte drinkers: The price of coffee futures hit a 10-year high. (FT)
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